Lampert floats Sears another $100 million

Sears Holdings may borrow more money from CEO Edward Lampert's hedge fund as the retailer enters the critical holiday season.

The Hoffman Estates-based parent of Sears and Kmart stores has been fighting for survival since January, when it announced it would close 150 underperforming stores and sell the company's Craftsman tool brand to Stanley Black & Decker for about $900 million.

Sears Holdings may borrow more money from CEO Edward Lampert's hedge fund as the retailer enters the critical holiday season.

The Hoffman Estates-based parent of Sears and Kmart stores has been fighting for survival since January, when it announced it would close 150 underperforming stores and sell the company's Craftsman tool brand to Stanley Black & Decker for about $900 million.

As part of this latest lifeline, Lampert, through his ESL Investments fund, agreed to loan Sears an additional $100 million prior to Dec. 1—if the retailer agrees to pledge more stores or other assets as collateral.

The agreement, disclosed in a filing with the Securities and Exchange Commission, is part of a $500 million line of credit, backed by 61 Sears properties, that ESL gave the retailer in January. Sears tapped the full amount but paid back about $100.5 million of the initial loan this summer, after selling more Sears and Kmart stores. That payment freed up the cash for this latest infusion.

The remaining $400 million of the original loan, which carries an 8 percent interest rate, is scheduled to come due in July 2020. The new $100 million has an 11 percent rate and is due in April 2018.

LOOKING FOR BREATHING ROOM

In March, Sears wrote in its annual report that "our historical operating results indicate substantial doubt exists related to the Company's ability to continue as a going concern." Since then, it has announced it would shutter nearly 100 more stores, on top of 150 closures announced in January. Sears currently operates 610 Kmart stores and 640 Sears stores.

If Sears taps this most recent amount, it would bring the total loan from Lampert and ESL to $2.2 billion since September 2014. (The terms of loans vary; some have already been paid back.)

With the most recent infusion, Lampert is providing a bit of breathing room as Sears enters the holiday selling season, which has been a disaster for it in recent years. In 2016, the company reported a net fourth quarter loss of $607 million, compared to a $580 million loss for the same period in 2015. Same-store sales in November and December last year plunged between 12 and 13 percent, Sears said at the time.

Overall, sales have slipped steadily since 2005, when Lampert created Sears Holdings by merging Sears and Kmart.